Bizspace Spotlight

A Bank of North Carolina team meets. They are (L-r) Brent Bridges, SVP/credit… more

Julie Knight

They say thieves rob banks because that’s where the money is. Bankers themselves have to live by a similar logic. When it comes to growing their loan portfolios and boosting their earnings for shareholders, they have to go where the money is needed.

For Triad community banks, that’s increasingly not in the Triad itself. When qualified borrowers are few, and there’s a thicket of hungry, wing-tipped loan officers surrounding each one, then the 34 banks that serve the 12-county region sometimes have to broaden their horizons.

A Bank of North Carolina team meets. They are (L-r) Brent Bridges, SVP/credit… more

Julie Knight

“For us, growth outside the Triad has everything to do with the expansion of our footprint, and the better brand recognition we’re building in the markets we’ve expanded to,” said Rick Callicutt, CEO of High Point-based Bank of North Carolina, which has extended its footprint in recent years all the way to the South Carolina coast. “We’re still growing in the Triad but that external growth in the Triangle, in Charlotte, in Greenville gives us a different opportunity to grow loans. That opportunity hasn’t existed in the Triad at a robust level for a long time.”

Tepid in the Triad

There are many ways to slice the bevy of banking data contained in the FDIC’s annual Deposit Market Share Report, which details the distribution of bank deposits in a given geography among the institutions in that market each year as of June 30. But the most recent report shows the 12 counties in the Triad have been a lackluster place for the banking business in 2012 and 2013, echoing the state of the economy.

Overall, total deposits in the region grew by about 2.5 percent, with most of that growth coming from the urban counties of Guilford and Forsyth, which saw money on deposit rise by 3.6 percent and 4.2 percent respectively (see chart). By comparison, the same 12-county area saw deposit growth of 4.7 percent from 2005 to 2006, before the economy crashed.

The rural and suburban counties fared worse. Only two of them, Caswell and Davidson, managed to put more money in the bank last year, by 2.8 percent apiece. Montgomery County saw the biggest percent reduction in deposits, by about 10.8 percent.

That’s why Triad bankers are increasingly crossing regional boundaries in search of new business. Bank of N.C., Asheboro-based CommunityOne and First Bank, which is in the process of moving its headquarters out of the Triad from Montgomery County to Moore County, have all tallied deposit growth in the markets they serve outside the Triad since 2011, while shrinking totals at home (see chart).

“Economically, if you look at the demographics, Raleigh and Charlotte are doing better in the recovery than the Triad is,” said David Barksdale, vice president of strategy at Greensboro-based NewBridge Bank.

NewBridge has recently focused its branch expansion in those areas and the coast though its acquisition of Security Savings Bank, though it has yet to see significant deposit growth in those areas.

“The Triad still has the bulk of our footprint and it remains a great focus for us because it’s home. It’s just been slower to bounce back than some other areas in North Carolina,” Barksdale said.

Hey, what about us?

Don’t take it personally, Triad. If you bat your eyelashes and wave a healthy balance sheet at them, bankers will be beating down your door to lend you money here, too. But the fact that more alluring neighbors seem to be getting more of the attention these days does have some implications for those still tending the home fires. (see related story, Hey pal, can you spare a loan?)

For one thing, there’s a better chance the money you put in the bank here at home will go to fuel economic growth somewhere else. There’s nothing sneaky about that — banks aren’t obligated to lend straight back into the same communities they gather deposits from. But money only works as fuel where it actually ends up being used.

UNC-Charlotte banking professor Tony Plath said geographically expanding community banks are using a strategy that Winston-Salem-based regional powerhouse BB&T has employed for a long time: “You gather deposits in rural areas where there is less commercial business activity, then you intermediate them into your growing markets.”

That was exactly the strategy that Bank of N.C. was following when it bought up the much smaller Bank of Randolph in October, Callicutt said. His team was never under the illusion that they would find a treasure trove of loan opportunities in and around Asheboro.

“But what that did for us was that that bank had been a fabulous community bank for many years, and had been able to grow core deposits very well,” he said. “That’s very valuable in our business, particularly the low-cost core deposits, so we can grow assets (loans) in other markets that are growing more quickly.”

Banks like core deposits that come directly from their own local customers because they typically aren’t always chasing higher rates from one bank to another or carrying the costs of brokered wholesale deposits brought in from outside. It takes longer to start building those core deposits in new markets where a bank’s brand isn’t well known than it does to start lending, Callicutt said, “so you have to figure out how to subsidize that with slower-growth markets that have more stable deposit opportunities.”

As banks hunt for the greenest possible pastures, they may also have to put off projects that could contribute to banking growth here in the Triad and make more resources available to local customers.

Barksdale, at NewBridge, said he wants to see additional offices in both Winston-Salem and High Point, cities where NewBridge has just one centrally located full-service branch each. By comparison, NewBridge has two branches in Reidsville and three in Lexington, the hometowns of the two banks that merged to form NewBridge in 2007.

But it gets expensive to open more than one or two new branches each year, Barksdale said, and in 2013 NewBridge opened in both Raleigh and Charlotte to capitalize on the opportunities the bank sees there.

“That doesn’t mean the others aren’t important; we just have to make choices,” he said.